Algo-Trading: The Past, Present & The Future
Algo trading is gaining popularity among Indian traders. As a result, many platforms are coming up with algo-trading facilities and with plenty of strategies to deploy.
Traders today are ready to switch to algo-trading but are confused about where they can get started. But, before we proceed to find out algo-trading’s future in India, we need to have a look at how it has been during past years, and what the current times hold.
THE PAST
If you would have started algo-trading a few years back as a side hustle, it would have been challenging for you to manage trading with your job.
What on the other hand would have been more difficult is to automate your trades to execute the buy and sell orders.
Here’s what you would require to automate an order execution:
- Access to the real-time data feed
- Charting platforms
- A bridge/plugin to connect your broker’s account with the charting platform
- An Order Management System to execute trades
- A cloud server
The real-time data that you’ll subscribe to, with the price data, will be shared with your charting tool/platform. You’ll have to code your trading strategy so that you can create buy and sell signals. You’ll then need a bridge/plugin connecting your charting platform with your broking account. This is essential to push the buy and sell orders directly to your trading account.
You’ll then need a cloud server to ensure that all these services are carried out without any disruption.
The problems you would face then mainly due to various layers of connection are:
- Connection issues while getting real-time data from your vendor
- You might not know how to code your trading strategies
- The plugin/bridge connecting your charting software and the broker account goes down many times leading to missed trade opportunities
- You’ll end up paying high infrastructure costs to automate your trades
THE PRESENT
Owing to the growing popularity and technology, many brokers have come up with automated trading platforms. Brokers have started their own API platforms that are free of cost for retail traders. These platforms allow traders to create and deploy their own trading strategies or to simply choose from the existing strategies and execute flawless trades.
The rest of the trading requirements like access to real-time data, plugins, VPN, and charting platforms are taken care of by your broker. This reduces your cost of carrying out fully automated trades.
THE FUTURE
Retail traders will soon start building trading systems that will be based on alternate data sets. The price data related to stocks is already available for traders. Hence, they’ll be looking for information related to other factors that can affect the stock’s price.
In many developed markets, investment banks have already started using alternate data sets. Social networking apps share an immense amount of data every other second. However, in the world of trading, it is the herd mentality that still prevails. The alternate data being shared is vast and is impossible for a retail trader to analyze the same.
The future trading era will witness many startups coming up with AI and Machine Learning Technology to use the alternate data. Information access at a low cost is what traders can expect in the future.
Algo-trading in India will focus on delivering solutions offered by startups that are focused on alternate data sets. This will help traders and investors in taking faster trade decisions.
